Correlation Between Kolon Plastics and Shinsegae Engineering

Can any of the company-specific risk be diversified away by investing in both Kolon Plastics and Shinsegae Engineering at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Kolon Plastics and Shinsegae Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kolon Plastics and Shinsegae Engineering Construction, you can compare the effects of market volatilities on Kolon Plastics and Shinsegae Engineering and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Kolon Plastics with a short position of Shinsegae Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kolon Plastics and Shinsegae Engineering.

Diversification Opportunities for Kolon Plastics and Shinsegae Engineering

0.65

Correlation Coefficient

Kolon Plastics  Shinsegae Engineering

Poor diversification

The 3 months correlation between Kolon and Shinsegae is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Kolon Plastics and Shinsegae Engineering Construc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Engineering and Kolon Plastics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Kolon Plastics are associated (or correlated) with Shinsegae Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Engineering has no effect on the direction of Kolon Plastics i.e., Kolon Plastics and Shinsegae Engineering go up and down completely randomly.

Pair Corralation between Kolon Plastics and Shinsegae Engineering

Assuming the 90 days trading horizon Kolon Plastics is expected to under-perform the Shinsegae Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Kolon Plastics is 1.12 times less risky than Shinsegae Engineering. The stock trades about -0.03 of its potential returns per unit of risk. The Shinsegae Engineering Construction is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,713,198  in Shinsegae Engineering Construction on October 11, 2024 and sell it today you would earn a total of  98,802  from holding Shinsegae Engineering Construction or generate 5.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Kolon Plastics  vs.  Shinsegae Engineering Construc

Kolon Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kolon Plastics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shinsegae Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinsegae Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinsegae Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kolon Plastics and Shinsegae Engineering

The main advantage of trading using opposite Kolon Plastics and Shinsegae Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kolon Plastics position performs unexpectedly, Shinsegae Engineering can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shinsegae Engineering will offset losses from the drop in Shinsegae Engineering's long position.

The idea behind Kolon Plastics and Shinsegae Engineering Construction pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.